Elliott, a private investment firm founded in 1977, and its affiliates ("Elliott"), have a position representing over 3% of Akzo Nobel N.V. ("Akzo Nobel") making Elliott one of the Company's top five investors according to data available on Bloomberg. Elliott became an investor in Akzo Nobel in late 2016 based upon the Company's significant undervaluation and underperformance relative to its self-selected peer group over one, three and five-year periods.
Elliott has noted with concern the failure of Akzo Nobel to engage with PPG Industries, Inc.'s ("PPG") in relation to the two bids which PPG has put forth for the Company. Elliott has not found the reasons proffered by Akzo Nobel's Boards for failing to engage compelling.
Although Elliott views PPG's second bid of EUR 90 per share (cum dividend) as inadequate, it views such level of bid price to be a credible basis for engagement, representing a 39.7% premium to Akzo Nobel's undisturbed price. It is only through engagement that Akzo Nobel can determine if PPG is prepared to bid at a level that provides adequate consideration to shareholders.
Secondly, it does not appear that Akzo Nobel has adequately consulted with shareholders before rejecting both bids. Had Akzo Nobel adequately consulted with shareholders, we believe they would have found that most shareholders want the Boards to engage with PPG. A recent shareholder survey conducted by Sanford C. Bernstein & Co., LLC, [1] concluded that an overwhelming majority of Akzo Nobel shareholders would like Akzo Nobel to engage with PPG. This conclusion is further supported by the results of a survey conducted by a leading proxy solicitation firm which Elliott has engaged on the Akzo Nobel matter.
Akzo Nobel's Supervisory Board and Management Board must take into consideration their prevailing corporate governance duties and broader stakeholder obligations and engage with PPG in order to objectively evaluate the benefits of Akzo Nobel's standalone strategy versus a transaction with PPG. A meaningful shareholder consultation should be part of such an evaluation process.
Aside from valuation, a second group of criteria which Akzo Nobel cited in rejecting PPG's bids and refusing to engage were broader stakeholder considerations. While correct in recognizing the risks and uncertainties involved in such a large and complex transaction, Akzo Nobel cannot duly analyse these risks and uncertainties without engaging with PPG. In Elliott's view, the combination of Akzo Nobel and PPG has the potential to create a stronger company which could devote more resources to R&D, innovative product development and sustainable business practices, thereby creating opportunities for employees, benefiting customers and advancing environmental considerations. A comprehensive and objective evaluation of the benefits of Akzo Nobel's standalone strategy versus a transaction with PPG is only possible following engagement with PPG. It is unfair for Akzo Nobel to continually criticize PPG's offers for failing to address stakeholder concerns if Akzo Nobel has been unwilling to engage with PPG to articulate precisely what those concerns are and suggest possible solutions.
Therefore, Elliott urges Akzo Nobel to engage with PPG immediately to determine whether PPG is prepared to bid at a level that provides adequate consideration to Akzo Nobel shareholders and whether PPG can adequately address all relevant stakeholder considerations. At this juncture, Elliott is disappointed by Akzo Nobel's conduct in relation to PPG's bids, and concerned that Akzo Nobel appears to be ignoring the will of shareholders which seems to strongly support engagement with PPG.
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1. "Akzo Nobel / PPG: What Investors Think," Sanford C. Bernstein & Co., LLC, 17 March, 2017
Finally, Elliott notes that there has been a great deal of market confusion surrounding the rights of Stichting Akzo Nobel, Akzo Nobel's priority shares and corporate defences. Elliott believes one or more shareholders jointly representing 10 per cent of Akzo Nobel's issued capital can convene an EGM of Akzo Nobel at which (assuming that over half of the issued capital is represented) shareholders can remove Management and Supervisory Board members by a majority vote. To the extent that Akzo Nobel is not responsive to the desires of its shareholder base for engagement and is remiss in its governance obligations to shareholders, Elliott will consider appropriate remedies, including possibly requesting the convocation of an EGM of Akzo Nobel.
Notes to Editors:
About Elliott
Elliott Management Corporation was founded in 1977 and has one of the longest track records of any private investment fund manager operating today. Employing a multi-strategy trading approach, the firm manages approximately USD 32 billion in two funds for a range of investors, including pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. Elliott Management, which is headquartered in New York, has approximately 400 employees worldwide, with offices in the U.S., London, Hong Kong and Tokyo. The firm's principal objective is to generate a return which is as high as is consistent with a goal of minimizing losses during adverse financial market periods.